Truck Ins. v. Unigard Ins.

• Decision Date: 10 April 2000
• Citation: 94 Cal.Rptr.2d 516,79 Cal.App.4th 966
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 2 Dist. 2000) TRUCK INSURANCE EXCHANGE, Plaintiff and Respondent, v. UNIGARD INSURANCE COMPANY, Defendant and Appellant. B127813 Filed

94 Cal.Rptr.2d 516 (Cal.App. 2 Dist. 2000)

TRUCK INSURANCE EXCHANGE, Plaintiff and Respondent, v. UNIGARD INSURANCE COMPANY, Defendant and Appellant.

B127813

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, SECOND APPELLATE DISTRICT,

DIVISION ONE

Filed 4/10/00

APPEAL from a judgment of the Superior Court of Los Angeles County, Judith C. Chirlin, Judge. Reversed with directions.

(Los Angeles County Super. Ct. No. BC170335)

Brown & Peterson, David F. Peterson and Marguerite L. Brown for Defendant and Appellant.

O'Flaherty, Cross, Martinez, Ovando & Hatton, O'Flaherty, Cross, Martinez & Ovando, Robert M. Dato, Arthur R. Petrie II, Brian P. Barrow; Hatton, Petrie & Stackler and Arthur R. Petrie II for Plaintiff and Respondent.

CERTIFIED FOR PARTIAL PUBLICATION^*

MASTERSON, J.

Faced with multiple lawsuits, a company tendered the defense of the actions to one of its insurers. After paying defense costs and indemnity, the insurer looked to an alleged co-insurer for contribution. The co-insurer refused to contribute on the ground that it had not been asked to participate in the litigation, by tender of defense or otherwise. This lawsuit followed. The trial court found that the co-insurer was obligated to contribute. We disagree and reverse.

BACKGROUND

In the late 1980's and early 1990's, The Anden Group, a general contractor, worked on several residential developments in Southern California. Anden contracted with Applied, Inc. or a related company to waterproof the outdoor decks of the homes. After the properties were sold, the homeowners began to notice construction problems, including water damage to the decks. Litigation ensued. From 1989 to 1993, Anden was named as a defendant in five separate actions alleging construction defects. Each time, Anden filed a cross-complaint against the subcontractors and other companies involved in the construction project.¹ The history of the litigation is as follows.

Meadowwood Village, located in Rancho Cucamonga, is a condominium complex consisting of 41 buildings, each housing 8 units. On November 2, 1989, the Meadowwood homeowners association filed a construction defect action against Anden (Meadowwood Village Homeowners Association v. The Anden Group (Super. Ct. San Bernardino County, 1989, No. RCV051111)). Anden cross-complained against "Applied, Inc. dba Applied Systems Waterproofing" and its officers. The defense of the cross-complaint was tendered to respondent Truck Insurance Exchange. Truck retained Cummings & Kemp to defend Applied, Inc.; it chose separate counsel, Nyman & Johnson, to defend the officers. All told, Truck paid $154,652 in defense costs and approximately $50,000 in indemnity. A tender was also made to appellant Unigard Insurance Company. It paid $25,000 in defense costs and $30,000 in indemnity.²

Cimarron Oaks VI is a 35-unit residential development in Ontario. On August 6, 1991, the Cimarron Oaks VI homeowners association filed suit against Anden, alleging various construction defects (Cimarron Oaks VI v. The Anden Group (Super. Ct. San Bernardino County, 1991, No. RCV059099)). Anden filed a cross-complaint against "Applied Systems" and its officers. By letter dated October 2, 1992, the defense of the cross-complaint was tendered to Truck. The defense was never tendered to Unigard.³ Truck retained Cummings & Kemp to represent "Applied Systems" and chose Nyman & Johnson to represent the officers.⁴ Truck paid $60,720 in defense costs and $15,000 in indemnity.⁵

Another project, Cimarron Oaks XI, located in Diamond Bar, led to a similar lawsuit against Anden (Cimarron Oaks XI v. The Anden Group (Super. Ct. L.A. County, 1991, No. KC004708)). As in Cimarron Oaks VI, Anden cross-complained against "Applied Systems" and its officers. The defense was tendered to Truck but not to Unigard. Once again, Truck retained the same counsel to separately represent the company and the officers.⁶ Truck paid $84,870 in defense costs and $10,000 in indemnity.⁷

Homeowners in Vista del Flores, a 160-unit complex in Lake Forest, also filed a construction defect action against Anden (Vista Del Flores v. The Anden Group (Super. Ct. Orange County, 1993, No. 715927)). This time, Anden cross-complained against "Applied, Inc.," not Applied Systems or its officers. Applied, Inc. tendered the defense to Truck on August 4, 1994. Truck, in turn, retained Cummings & Kemp as defense counsel. Four months later, on or about December 14, 1994, Unigard received notice of the lawsuit. In response, Unigard began contributing to Applied, Inc.'s defense. By the end of the action, Truck had paid $23,693 in defense costs; Unigard had paid $9,309. On June 4, 1996, the case was mediated and settled. Truck and Unigard each paid $12,500 in indemnity.⁸

Finally, in Chino Hills, residents of Sunset Townhomes, a condominium complex, were experiencing similar construction problems. They, too, filed suit against Anden (Sunset Townhomes Homeowners Association v. The Anden Group (Super. Ct. San Bernardino County, 1993, No. RCV03140)). They also named Applied, Inc. as a defendant. For its part, Anden filed a cross-complaint against Applied, Inc. In a letter dated July 25, 1994, Applied, Inc. tendered the defense to Truck. Under a reservation of rights, Truck retained Cummings & Kemp as defense counsel. Shortly thereafter, the case was also tendered to Unigard and Golden Eagle Insurance Company, both of which agreed to participate in the defense. On May 11, 1995, Truck withdrew from the case, having paid $12,453 in defense costs.⁹ Unigard incurred $12,111 in defense costs. In or around April 1996, the case settled for $75,000, with Unigard and Golden Eagle each paying half.¹⁰

On April 30, 1997, after all of the construction defect cases had settled, Truck filed this action against seven insurance companies, seeking declaratory relief and equitable contribution. Neither Applied, Inc. nor Truck had requested Unigard's participation in the Cimarron cases before they settled. Rather, by letter dated May 27, 1997 - one month after the present action was filed but before it was served - Truck demanded contribution and threatened to serve the complaint if Unigard refused to contribute. Truck's letter, consisting of 14 pages, recited the details of the underlying litigation and included several tables depicting the defense and indemnity payments made or allegedly owed by eight insurers, including itself.

By letter of June 24, 1997, Unigard informed Truck that it was not liable for contribution in the Cimarron cases because it had not been tendered the defense. Unigard denied liability in the other cases on the ground that it had already paid defense costs and indemnity as to them. Truck decided to go forward with this action.

On June 29 and June 30, 1998, Truck's claims for declaratory relief and contribution were tried to the court on stipulated facts.¹¹ The trial court found in favor of Truck. More specifically, the court ruled that Unigard was liable for 50 percent of the defense costs and indemnity in Cimarron Oaks VI, Cimarron Oaks XI, Vista del Flores, and Sunset Townhomes.¹²

As to the Cimarron cases, Unigard was found liable for $103,600 in defense costs, indemnity, and interest. With respect to Vista del Flores and Sunset Townhomes, the trial court determined that Unigard was liable for a total of $15,330. Prejudgment interest was also awarded. The trial court reduced Unigard's liability to account for the contribution payments made by other insurers. On September 15, 1998, judgment was ultimately entered in Truck's favor for $100,860. Unigard filed a timely appeal.

DISCUSSION

Unigard contends that it is not liable for defense costs or indemnity with regard to the Cimarron cases because it was not tendered the defense or otherwise put on notice of a potential claim for contribution. As to Vista del Flores and Sunset Townhomes, Unigard argues that the trial court erred in the way it allocated the loss among co-insurers and that prejudgment interest should not have been awarded. We address these points seriatim.¹³

A. The Cimarron Cases

The question of whether Truck is entitled to contribution from Unigard in the Cimarron cases rests on the application of equitable principles to stipulated facts. Accordingly, we are presented with a question of law, which we decide de novo. (See 20th Century Ins. Co. v. Stewart (1998) 63 Cal.App.4th 1333, 1337; Carroll v. County of Los Angeles (1997) 60 Cal.App.4th 606, 608.)

The trial court concluded that Unigard was liable for contribution on the Cimarron cases, stating: "Truck's right to contribution does not depend on its tender of the underlying matters to Unigard." We agree that Truck did not have to "tender the defense" to Unigard. However, we conclude that, when Truck undertook the defense in the Cimarron cases, it should have notified Unigard of the possibility of contribution.

"Equitable contribution is . . . the right to recover . . . from a co-obligor who shares such liability with the party seeking contribution. In the insurance context, the right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others. . . . Equitable contribution permits reimbursement to the insurer that paid on the loss for the excess it paid over its proportionate share of the obligation, on the theory that the debt it paid was equally and concurrently owed by the other insurers . . . . The purpose of this rule of equity is to accomplish substantial justice by equalizing the common burden shared by coinsurers, and to prevent one insurer from profiting at the expense of others. . . .

"[T]he reciprocal contribution rights of coinsurers who insure the same risk are based on the equitable principle that the burden of indemnifying or defending the insured with whom each has independently contracted should...